Mar 30,2023

Learn How to Avoid China Supplier Scams

Many businesses rely on China to manufacture and source goods in today's global economy. While there are countless reputable suppliers in China; unfortunately, plenty of scams can leave you with poor-quality products, lost money, and damaged business relationships. Knowing how to avoid these scams and protect your business from fraudulent activities is crucial. In this article, we'll provide tips and tricks on identifying and avoiding China supplier scams, so you can confidently do business with legitimate suppliers and build a successful partnership.

Many buyers around the world conduct wholesale businesses in different products. Since many suppliers are from China because of their ample supply at a low price, some risk factors also arise. What are those risk factors? It is about getting scammed by a supplier who is unknown to you. It is not just about a Chinese supplier but anyone in the world. Thus, a buyer must do due diligence before conducting business with an unknown global supplier. To simplify things for buyers, we have collected some helpful ways to help them avoid fraud.

Some Common Frauds Buyers Face

There are many ways any country's supplier may commit fraud against you. If you trade with a Chinese supplier, you must know some common signs or red flags. A fraudulent supplier will do an unusual act, which may be a sign of fraud for a buyer. To simplify it, we made a list of some common tricks. To avoid them, we provided possible solutions after it, so a buyer can always feel safe.

1. Counterfeit products

2. Not fulfilling promises and claims

3. Increase in price after some times

4. The difference in the sample and ordered products

5. Forged certificates 

6. Taking advanced payment and disappear

7. Late delivery of goods

8. Not sending samples

Do Not Send Payment to Personal Bank Account

The payment factor is susceptible, especially in international trade. Since you are dealing with unknown entities globally, you must be very cautious. Learning how to pay suppliers in China would be best to avoid getting scammed. Many buyers fall into the trap of sending payments to the personal bank accounts of suppliers, which is a colossal blunder. Never send payment if a supplier shares their private bank account details. It is a sign that the supplier is about to steal your money and will run away. Once they have gone, it will be hard to catch them.

A buyer can ask the supplier to share their company's bank account. That account name must match the company's official name; this is how a buyer needs to verify before sending payment. Moreover, some top banks in China can be an intermediary of payment between a buyer and supplier. For example, China is home to various prominent banks, such as the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Bank of China, and the China Construction Bank. These four top banks are reliable in payment methods for international trade. 

Choose Buyer-Safety Wire Transfer Payment and Credit Card

Connecting to the above factor, you must also be cautious about online payment methods. Some new buyers may fall for this trap by immediately sending wire transfer payments. Never make this mistake because you might not be able to recover the amount at all. Some safe wire transfer methods provide buyer safety; this is one way of ensuring your protection if you are a buyer. Another safest way to pay Chinese suppliers is via credit card. 

Choose a credit card option for international payments to avoid scams; this is one of the primary payment methods in international trade. A buyer never knows what could happen to their shipment or the product quality they may receive at the port. With the credit card method, buyers can cancel the payment anytime. It occurs when a supplier commits product quality and quantity fraud and does not send delivery at all. To save yourself from all these possible scams, you need to have a credit card payment method in it.

Verify Physical Existence via Personal Auditor

No one should make the mistake of trusting online presence only. Anyone can make a website, add false information, and create a non-existing address. Since you are not aware of Chinese addresses, you need to know about the physical existence of the supplier. A buyer must spend some money on sending a personal auditor or choose a Chinese supplier-selecting service. It is essential to visit and verify the location of the factory. Many trading companies claim to be manufacturing firms, creating problems for buyers.   

Do a factory visit or send someone else to audit it; this will clarify any doubts about dealing with an authentic supplier in China. You may not be aware, but a trading company can commit fraud with you by having distorted communication. They might keep their complete information private. So, a physical visit is mandatory here if you are choosing a supplier for a long-term deal. 

Sign Written Contract and Return Policy

A red flag from a scammer is that they will not sign a written agreement. This hesitation can be a terrifying moment for a buyer. By not agreeing on a clear-cut contract and policies, they are showing that you need to step back. A buyer may need to return the goods because of any reason. It could be about quality or counterfeit production of goods. Thus, always make your supplier sign a return policy indicating clear and straightforward rules for returning goods. 

New buyers in international trade may need to learn about it. It is better to tell a supplier about all the reasons for returning goods to China; this reduces the risk of China supplier scams.

This policy must include who will pay, reasons for the return, the cost of resending the goods, etc. Furthermore, buyers must have physical evidence of it in the form of a signed agreement.

Verify Business Licenses with International Trade Regulation Bodies

Every country has a regulatory authority or chamber of commerce that controls all the traders under an umbrella. Likewise, China has some trade bodies that comply with international rules and regulations between suppliers and buyers. One way to avoid fraudulent Chinese suppliers is to contact these bodies. A chamber of commerce must keep all the members of a trade aligned with the laws of commerce. Even for international trade, there are numerous legal ways to verify the business license of a Chinese supplier. 

In this case, you can find some names like the China Council for the Promotion of International Trade and the China National Committee for the Promotion of Imports and Exports. They come under the ministry of commerce in China. In addition, there are western bodies like the World Trade Organization, the EU Chamber of Commerce in China, and the Business Council in China of the US, Australia, and Canada. Similarly, if you belong to any other region of the world, there must be your country's trade and commerce alliance with the Chinese government. You can choose those bodies to help you find legal documentation of a Chinese supplier.

Tell Supplier to Share Previous Buyer Reference

It is safe to ask a supplier about his previous buyers' contact details; this will help buyers cross-check the supplier's credibility. If a supplier is genuine, he will share details of his previous clients. You can contact those references and verify if the supplier is an actual producer of goods. Moreover, it is an easy way to avoid Chinese supplier scams; this will take little time, and it will be better to examine the supplier's integrity in terms of payment, product quality, delivery time, and after-sales services.

Non-Urgent and Face-to-Face Communication 

Never let the supplier get you in urgency. It is a common tactic Chinese suppliers use to make an urgent deal and make the buyers panic. This act makes the fraudulent suppliers get away with cheap tricks. They restrain buyers from having a complete analysis of supplier selection; this leads to mistakes and errors in finding the factual background of a supplier. To eliminate any fraud, buyers must communicate face-to-face with suppliers. Also, it is better to take enough time to cross-check everything before selecting a supplier; this can save them from facing any fraud. 

Avoid Paying Upfront/Advanced Payment

A genuine supplier will never ask for an upfront payment. Even if they do that, they must be doing business with a buyer for a long time. A new supplier asking for advanced payment is a sign of a scam. One of the methods to avoid China supplier scams is to cancel advanced payment ideas and pay after the goods are received. Satisfy yourself by checking the received goods and then paying the supplier. Suppliers doing business for the first time with a buyer agree with the terms and conditions placed by them; this is how a credible supplier entrusts new buyers. In case of a scam, the supplier will try to receive money in advance and will try to disappear immediately.

Search for Reasons for Supplier's Unusual Low Price

Wholesalers offer low prices, which is not unusual. It gets unusual when a supplier provides a significantly lower price than the wholesale price in the industry. There is always a minimum price level; a buyer can get the price estimation from other suppliers. However, Chinese suppliers work on economies of scale. They manufacture goods in huge volumes, which results in meager production costs; this makes them offer much lower prices than other countries' suppliers. 

It gets weird when a buyer receives meager rates from a specific supplier in the Chinese industry. For instance, almost every Chinese supplier offers a price per piece between $ 1 and $ 1.5, but your supplier offers $ 0.5; this creates a sense of doubt, which means there must be something fishy about that supplier. How can someone quote a much lower price than the whole industry? This is a sign of expected fraud. Yes, you can ask for a reason via costing methods.

Tell Supplier to Take Shipping Responsibility

To test a new supplier, you must ask them to take shipping responsibility. If they agree with it, that means the supplier is valid. If they disagree with it, there is something wrong. It would be best if you asked about the reason for not taking shipping responsibility because a valid supplier will not let his buyer get into any doubt. If someone is trading with a Chinese supplier for the first time in life, they must know how to avoid every China supplier scam. Ask the supplier to take shipping responsibility. If they refuse, find another supplier. 

Sample Product for Analyzing Delivery Time and Product Quality

We have said earlier and again saying that some traders pretend to be manufacturers. Another way to avoid getting scammed by them is to ask them to send a sample product. They will send the sample if they are an actual supplier with a production plant. This way, you will know their production quality and standards. In case you receive a sample late, there must be a chance that you are about to be scammed. Late delivery can signify that they are a trading company that asked someone else to produce a sample in China. 

If you receive a sample on time with no issue with the quality, place your order. Then you need to compare the quality of the received order with the sample. If they are the same, you have found an original supplier. 

Request for Production Certificates

Certificates can be a tool to verify a supplier. An original supplier complies with worldwide standards, and they have received the required certificates for production. The production industry has many certificates: RoHS, REACH, ISO 9001, CE, FSC, GMP, etc. Buyers can verify suppliers through those global certificates. But some scammers fabricate other companies' certificates with the help of software. Some suppliers make forged certificates to deceive buyers. You must contact certificate issuing bodies for deep verification to reduce any risk of China supplier scams. 

Search for Online Reviews

There are two types of reviews, authentic reviews and fake reviews. It would be best to find all the reviews about the supplier on B2B websites like Alibaba, Global Sources, EC21, Tradewheel, etc. Some top B2B platforms are where bulk suppliers and buyers are found. Check reviews on those platforms to know about your selected supplier.

Performance and star ranking systems help identify the worth of a supplier. In this way, you can learn how to avoid Chinese supplier scams. However, some suppliers have fake reviews generated on their websites. You must find a neutral platform with no chance of a fake review.

Conclusion 

These were all the possibilities and solutions for global-trade frauds. If you want to keep things simple without making much effort, you can choose a legal team to select suppliers in China. They will charge their fees and provide you with the most suitable and credible supplier from China.